World wheat bounty at risk as dry spell spooks market
Rains are forecast in some of Russia's drought stricken southern agricultural regions in the coming days, but hot dry weather will persist in south central European Russia and the southern Volga valley, the state forecaster said.
"It's true it's dry in Russia and that the situation of the crops is worrying but the last months can change a lot," said Le Molgat.
In the United States, though harvest of hard red winter wheat, a key bread-making grain, is already underway, rainfall could still help boost prospects in northern parts of Kansas and other states where harvest has not yet started.
But overall production is still expected to be far better than last year and in line with or better than average. U.S. winter wheat was rated at 58 percent "good to excellent" as of Sunday, compared to 60 percent the prior week; if that holds, it would be the second-best rating of the crop of the past 12 years.
In Australia, dry weather is also a problem for farmers who are just now in the midst of planting their new wheat crops.
Although the La Nina system brought good soil moisture earlier this year, the east coast has had practically no rain in recent weeks, putting seeding behind schedule and threatening the future of the premium-quality wheat crop. Western Australia's grain belt has had below-average rainfall.
"Eastern Australia planting got off to a very strong start but has slowed in recent weeks," said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia.
In the meantime, many analysts reckon that last week's purging of short positions by hedge funds has likely run its course, providing a degree of equilibrium for the market.
As of a week ago, speculators in the three main U.S. wheat futures contracts were net short more than 45,000 contracts, according to weekly Commodity Futures Trading Commission data, their biggest such bearish position since April 2010, just months before the drought decimated Russia's crops.
"In one week the fund boys who had taken their eyes off the ball because they were more busy with Greece, the dollar, the French election, suddenly realized that the garden was not as rosy as they thought," Geneva-based Agrinews analyst James Dunsterville said.